The recovery has stalled. That's the message from the Federal Reserve's monthly Open Market Committee (FOMC) meeting. Its economists must be very worried about a double dip. Rather than maintain a stay-the-course strategy under the assumption of a slow recovery, they have decided to further loosen monetary policy. The Fed will reinvest the principal it obtains from its maturing mortgage-related securities and Treasuries in longer-term Treasury securities. This shows that the FOMC is very concerned about the U.S. economy, as it attempts to now keep down longer-term interest rates.
Let's start with the August statement's language about the recovery, or lack thereof:
Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months.
That might not sound like much, but it's a pretty big change in Fed-speak compared to what the Fed's statement said in June:
Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually.
So in about seven weeks, the committee has gone from thinking the labor market is improving gradually to believing that its recovery has slowed. That's a little bit surprising, considering that the private sector actually added more jobs in July than it did in May.